JAMA Forum: The End of the Beginning for the Affordable Care Act

It’s now halftime for the launch of the Affordable Care Act (ACA). People seeking coverage to begin on January 1 had to enroll between October 1 and the end of 2013, but they can continue enrolling until March 31, when the open enrollment period for 2014 ends. As Winston Churchill might have described it, it’s the “end of the beginning.”

Larry Levitt, MPP

The first half of the open enrollment period was not for the faint of heart. As I wrote in the JAMA Forum last February:

Until now, both benefits and risks of the law have been hypothetical. But soon we will have real experience, and it is very likely that it will be less than perfect. As the CBO [Congressional Budget Office] has projected, enrollment may be modest at first. There also will undoubtedly be technical glitches in the eligibility and enrollment systems that are being created from scratch on a tight schedule. Some people will see their premiums increase, and anecdotes about those cases will undoubtedly be highlighted in the media. The fact that others will see their costs decrease or will have insurance that offers better benefits and more secure coverage may be overlooked. Although personal out-of-pocket costs for health care should decrease for most people, some may nonetheless perceive their deductibles and co-pays as unaffordable.

Well, those prognostications all turned out to be true but admittedly quite understated.

The initial failures of the federal government’s insurance exchange, healthcare.gov (and some websites operated by state-based insurance exchanges as well), are now well-known, and they will no doubt be grist for many case studies in the years ahead at public policy schools. And the fact that many people buying their own insurance had their policies cancelled because they didn’t comply with the ACA—with the result being higher premiums for some—attracted massive news coverage, swamping the attention received by people getting better or cheaper coverage or insurance for the first time. (To be fair, not many people were able to apply for coverage through the federal website in October and November, so their stories were hard to tell.)

However, the momentum started to shift as 2013 wound down. The effort to fix healthcare.gov seems to have been largely successful. By the end of November, just 137 204 people had made it through the application process and selected a plan in the federal health insurance marketplace (which is operating in 36 states). By the end of December, however, enrollment in the federal marketplace had topped 1.1 million people (2.1 million total, including state-based exchanges).

As I also wrote back in February, enrollment was always expected to “start out low and grow over time.” But even with the enrollment surge in December, sign-ups are still lagging somewhat behind where the federal government expected to be at this point to hit the CBO’s projected total of 7 million enrolled in exchanges in 2014 (a projection that seems to have become a de facto target, even though it is not the best measure of whether or not the law is working).

Remember, though, that this is only halftime for the initial launch. Here are 5 things to watch out for in the second half of the open enrollment period over the next 3 months.

1. Will people pay their premiums? The figures released so far by the federal government and state-based exchanges represent the penultimate step in the enrollment process. Once someone picks a plan, her enrollment information is forwarded to the insurance company and she is billed for the first month’s premium. She does not technically have insurance until she pays that premium. There is still no systematic information available about how many of those who have picked a plan have paid their premiums and will actually have coverage in January. The nation’s major insurers announced in late December that people who pay their premiums by January 10 will be covered retroactively to the beginning of January, so we may know soon.

2. How big will the March enrollment surge be? It is not surprising that a lot of people enrolled in December, right before the deadline to get coverage effective January 1. It’s typical human behavior to wait until the last minute, and the technical problems in the enrollment systems made that a necessity for many. But although December was the last opportunity to enroll and get coverage when the new insurance rules under the ACA first go into effect, the true deadline is March 31. That’s when the open enrollment period ends and people have to get coverage or pay a penalty under the individual mandate. Plus I expect outreach efforts and advertising by insurers to continue to ramp up. Therefore, I wouldn’t be at all surprised if enrollment during March is even higher than in December.

3. What will be the mix of enrollees? Far more important than how many enroll is who enrolls. A recent analysis by the Kaiser Family Foundation found that if younger adults stay on the sidelines, it will not be the catastrophe that conventional wisdom suggests. Even more important for the stability of the insurance market is getting healthy people of all ages to enroll. There are mechanisms to prevent a premium “death spiral,” but premiums will increase if sicker people enroll in disproportionate numbers. Early reports from states suggest that enrollment skews older, although we will not know the health profile of enrollees for quite a while because applications for insurance can no longer ask about a person’s medical history.

4. Are low-income consumers enrolling? The latest comprehensive data available (through November) showed that 41% of those determined eligible to enroll in a marketplace plan were eligible to receive a tax credit that helps low- and middle-income enrollees pay their premiums. In contrast, the CBO projected that almost 90% of enrollees (6 million out of 7 million) would be receiving tax credits in 2014, under the assumption that higher-income enrollees would purchase plans outside of the new marketplaces (which have to follow all the same rules but do not qualify for tax credits). Is the lower-than-expected eligibility rate for tax credits a sign that low-income uninsured people are not yet getting reached—a potentially worrisome result? Or does it mean that higher-income people are enrolling in marketplaces in larger numbers than expected, a possible indicator that they are working? It’s still too early to tell, and it is entirely plausible that lower-income people will enroll towards the end of the period because they have little discretionary income and may not yet understand the extent to which their premiums will be offset by tax credits.

5. How will people perceive their coverage once they start using it? The ACA standardizes coverage sold to individuals into 4 value tiers—bronze, silver, gold, and platinum—with lower-value plans generally providing a higher deductible and lower up-front premium. This is a market-based system, where people can make their own trade-offs between the monthly premium and the value of the coverage. Deductibles were already quite high in the individual market before the ACA, and they have been rising in employer plans as well. But some people enticed by the low premiums in bronze plans may be surprised by deductibles of $4000 per person or more once they go to the doctor or fill a prescription. Some people may also be surprised to find that their plans don’t necessarily cover the physicians or hospitals they want to use. Both high deductibles and limited networks are functions of a competitive market-based insurance system, not anything directly required by the ACA. But these are plans purchased under the new health law, so people not surprisingly will likely pin blame on “Obamacare” if they’re unsatisfied with their insurance.

It was always going to be premature to evaluate the success of the ACA based on the first few months of implementation—or even the first year—and that is even more the case given how rocky those months were. However, how the next 3 months go and how people experience the health insurance system will heavily influence the initial judgments and narrative about the health law.

As baseball legend and soothsayer Yogi Berra once reportedly said: “You have to give 100% in the first half of the game. If that isn’t enough, in the second half, you have to give what is left.”

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About the author: Larry Levitt, MPP, is Senior Vice President for Special Initiatives at the Kaiser Family Foundation and Senior Advisor to the President of the Foundation. Among other duties, he is Co-Executive Director of the Kaiser Initiative on Health Reform and Private Insurance.

About The JAMA Forum:JAMA has assembled a team of leading scholars, including health economists, health policy experts, and legal scholars, to provide expert commentary and insight into news that involves the intersection of health policy and politics, economics, and the law. Each JAMA Forum entry expresses the opinions of the author but does not necessarily reflect the views or opinions of JAMA, the editorial staff, or the American Medical Association. More information is available here and here.